Decision Trees PowerPoint PPT Presentation

Coming Up. How to construct a decision tree?Components of a treeInterviewing decision makersHow to analyze a decision tree?Mathematical expectations. Folding back . Example. A preferred provider organization (PPO) has approached the benefit manager of a company of 992 employees.The PPO offer

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Decision Trees

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2. Coming Up How to construct a decision tree?
Components of a tree
Interviewing decision makers
How to analyze a decision tree?
Mathematical expectations.
Folding back

3. Example A preferred provider organization (PPO) has approached the benefit manager of a company of 992 employees.
The PPO offered to discount hospitalization services by 6% and outpatient services by 15% if the company would remove co-payments for employees utilizing the PPO

8. The Analysis Process Matters It informs that a decision is looming
Reassures that the analysis is fair
It removes decision makers from day-to-day concerns
It provides new insights while facilitating discussion

9. Process Interview decision makers and construct a preliminary tree
Present tree and show how various concerns are captured
Solicit a list of new concerns
Revise tree

10. New Concerns Separate general outpatient care from mental health care
Focus on employees who file claims
The PPO clinic might have less efficient practices
Lower co-pay may lead to over utilization
Group practices are more efficient than solo practices
Clinicians may generate their own demand
Show discounts

12. Estimating Probabilities from Data, Experts & Literature

13. Estimating Costs Review of cases at the employer site
Average cost of the sample
Review of cases at the PPO
Adjusted for case mix difference (PPO patients 30% sicker)

15. Analysis of Trees Folding back
Replace a node with its expectation
Continue until the decision node

17. Net Impact Expect cost under continue:
Expected cost after joining PPO: $871.08
Savings per family per year: $597.86
Sensitivity analysis
Not sensitive to 5% changes in hospitalization rate
Not sensitive to 5% changes in clinic visit rate
Sensitive to changes in calculation of cost of hospitalization and case mix differences

18. Myth of Analysis All options are depicted
Wait for a better offer
All consequences are enumerated
Other health care organizations were on the board of the employer
Assess utilities and fold back using expected utilities
Data are valid
Sensitivity analysis: see if small differences in estimates will change conclusions

19. Make Your Own Think through what is the unit of analysis (who decides)
Start with the decision
Think through possible events and consequences
Think through issues that should be captured
Make a draft
Revise to incorporate new issues